Influence of Consumption Smoothing on the Multiplier and Aggregate Demand Curve
The extent to which households engage in consumption smoothing directly influences the size of the multiplier effect and, consequently, the slope of the aggregate demand curve. Households that successfully smooth consumption have a low marginal propensity to consume (MPC), which leads to a smaller multiplier and a flatter aggregate demand curve. Conversely, an inability to smooth consumption results in a higher MPC, a larger multiplier, and a steeper aggregate demand curve.
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Ch.3 Aggregate demand and the multiplier model - The Economy 2.0 Macroeconomics @ CORE Econ
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Universality of Consumption Smoothing
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